Guest Columnist: 'Simple' versus 'sophisticated' in business deals

Tuesday

Apr 9, 2013 at 2:00 AM

The comedian Phil Hartman met a sad and untimely death 15 years ago, but he created several timeless characters through his stint on "Saturday Night Live" in the 1980s and '90s, including the caveman lawyer, Keyrock.

Tim McCausland

The comedian Phil Hartman met a sad and untimely death 15 years ago, but he created several timeless characters through his stint on "Saturday Night Live" in the 1980s and '90s, including the caveman lawyer, Keyrock.

Yes, Keyrock was an unfrozen caveman who graduated from law school and became adept at winning multi-million dollar personal injury lawsuits, principally by persuading juries with his "simple, caveman ways."

The fact Keyrock flew first class, drove BMW M3s and quaffed Chivas Regal was never evident to the eyes and ears of the simple jury members who heard only the uncomplicated yet winning words of the prehistoric caveman.

In the real world, being labeled "sophisticated" generally has been a good thing, but a recent string of decisions from the New York State Court of Appeals (the highest court in the state) suggest Keyrock may have been on to something by "playing" the primitive.

Every so often we read about a character who sells something — a piece of art, a '69 Pontiac GTO, jewelry, a software company — only to find out the poor slob feels cheated because the buyer went on to sell the same item soon thereafter for many, many times what our seller finally established as his selling price.

This happens every day, of course, but there have been several cases heard in New York recently where the "second sale" was so vastly and wildly above the original sale price the original seller sought redress under the law, according to New York State Law Digest, Issue No. 638, published in February.

In one case, the original payment of $1,000 was claimed by a sorry seller to be "commercially unreasonable" for a piece of a company that was valued soon thereafter for $33 million. Ouch!

In another case, three soon-to-be sellers made an aggregate investment of $125,000 in their business that they later sold for $1.5 million. Pretty good, but our shrewd buyer sold off the business interests a year later for $17.5 million. In this case, the sellers claimed the buyer owed them a fiduciary duty to include them in the bigger deal. Nice try.

In both cases, and in what appears to be the controlling trend, the court held the original sellers were sophisticated businesspeople and did not deserve any benefit of the doubt as to the fairness of the deals — nor could they claim the "winners" owed them any special duty to inform them of the subsequent better deals.

For various reasons not important to mention here, the court rejected the sour-grapes arguments of the "aggrieved" and made a special point of noting that sophisticated businesspeople should, basically, "know better."

So, next time you go to a contract negotiation or look to sell your aunt's old, dusty paintings, don't wear a Savile Row suit, smoke a briar pipe, carry a copy of ARTnews or regale your counterparty with tales of your polo victories in the Hamptons — or else you might be deemed a "sophisticate" which, in the latest perversity of our legal system, has become a synonym for "loser."

Tim McCausland is a trust and business development officer with the Orange County Trust Co., He can be reached at tmccausland@orangecountytrust.com.